Communications of the ACM
Studying the Current Status of Technology Adoption
Small and medium-sized enterprises (SMEs) are important to the U.S. economy, particularly to the high-tech sector. SMEs employ approximately half of all private-sector employees, generate 60% to 80% of new jobs annually, and employ approximately 40% of high-tech workers such as scientists, engineers, and computer workers [8, 11]. Further, SMEs play a critical role in nurturing industrial innovation, constituting 40% of highly innovative firms in 2002 [9]. SMEs also play a significant role in enhancing the competitiveness of an economy through the process of economic renewal by creation, elimination, and restructuring of economic sectors. Technology has been a critical factor in enabling SMEs to play this regenerative role in the U.S. economy [10].
Although some work has been done at the national level, little is known about the status of technology adoption by SMEs at the local level [2, 4, 12]. Accordingly, the intent of the research here is to investigate the current state of technology adoption by high-tech manufacturing SMEs in the Boston, MA, metropolitan area. We examine the adoption of technologies across the entire value chain, including the primary activities of manufacturing and support activities such as administration, human resource management, and design. This work has several additional purposes, one of which is to identify those factors that influence the adoption of technologies by SMEs. The degree of awareness the firms have about various technology solutions is highlighted. The data has been collected and analyzed so as to emphasize the role of firm size in technology awareness and adoption. This assessment of adoption can aid these firms in identifying the technology solutions they may be lacking. This study also provides policymakers with grounded knowledge to formulate effective policies, institute fiscal incentives, and design assistance programs that are tailor-made for the SMEs in the Boston area.
The surveys were administered to 655 firms in the Boston region with the assistance of Greater Boston Manufacturing Partnership (GBMP). A total of 158 firms responded, of which 135 were usable responses. The firms belonged to both discrete and continuous manufacturing serving the consumer products, electronics, machined parts, medical devices, and other industries. The responses were categorized into three groups: micro, small, and medium enterprises. Firms employing 110 people were categorized as micro; firms employing 11100 as small; and firms employing 101500 as medium.
Value Chain Framework
The value chain "divides a company's activities into the technologically and economically distinct activities it performs to do business" [5]. The firm's primary activities are inbound logistics, operations, outbound logistics, marketing, and sales and service. The primary activities require support activities to provide inputs and infrastructure. Support activities are firm infrastructure, human resource management, technology development, and procurement (see Figure 1).
Particularly for large firms, IT has permeated most of the value chain, transforming the performance of, and linkages between, value activities. The value activities have a physical and information-processing component. The information-processing captures, manipulates, and channels the data necessary to perform the activity [57]. SMEs in manufacturing must decide between expending resources on technology for information-processing activities and on the physical value activities. The SMEs are constrained especially because of the size and revenues of the firm [3]. Since the research investigated SMEs and their usage of technologies, it was important to explain the results in terms of how they organize their activities. The value chain approach has been employed to contexualize and elucidate the role of technology in SMEs (see Table 1).
Value Chain and Technology Adoption
Inbound Logistics involves actions associated with receiving, storing, and supplying raw materials. Inbound logistics is supported by supplier management and supply chain management technologies. Supplier management is the use of software to store and process supplier-related data. Supplier management is employed by one-third of SMEs. Small and medium firms employ supplier management software almost equally, but only 12.5% of micro firms employ it. Supply chain management (SCM) is the use of packaged software for planning and monitoring of material flow between the firm and its suppliers and customers. SCM is used by almost 25% of SMEs. Interestingly, SCM is one of the few software packages that micro and small firms utilize more than the medium firms. SCM spans several activities in the value chain.
Operations involve actions and processes associated with transforming material inputs into a finished product. It is supported by materials management, production planning, computer numerical control (CNC), and computer-aided manufacturing (CAM) technologies [1]. Materials management is the use of package software for planning and control of material storage and usage in a production environment. Materials management software is employed by more than half of SMEs, with 81.3% of medium-size firms, 62% of small firms, and 29.2% of micro firms employing this software. The production planning software is employed by a lesser proportion of SMEs. But this does not truly represent the proportion in micro, small, and medium firm categories. More than 80% of medium firms and a quarter of micro firms employ the production planning software. CNC are microprocessor-based systems that communicate work instructions directly to the manufacturing machinery. Although more than one-third of SMEs use CNC, the disparity between micro firms, small firms, and medium firms is substantial, with 12.5% of micro, 38% of small, and 62.5% of medium firms employing CNC. The differences are slightly less in the CAM usage among micro, small, and medium firms. Here, CAM is defined as the use of computers for planning the manufacturing process.
Outbound Logistics is the actions associated with the storage and physical distribution of physical goods to buyers. This activity is supported by order-processing and SCM technologies. Order processing involves the use of software packages to store and process customer orders. Order-processing software is employed by most of the medium firms, two-thirds of small firms, and approximately one-third of micro firms. SCM is employed by fewer firms, including only 18.8% of medium firms.
Marketing and Sales involve actions associated with advertising, promotion, pricing, and selling. This activity is supported by firm Web site and customer relationship management (CRM) technology. Most SMEs, including the micro, small, and medium groups have a Web site for marketing themselves over the Internet. CRM involves using software to store customer data for tracking and analysis of customer needs and sales activities. But the employment of IT by SMEs drops dramatically to approximately one-quarter in the case of another marketing and sales IT, namely CRM.
Service involves actions associated with providing service and assistance to the customer. This activity is also supported by CRM technology. A larger proportion of medium firms than small firms employ CRM. 16.7% of micro, 27.8% of small, and 28.1% of medium firms employ CRM.
Firm Infrastructure involves activities associated with general management, planning, finance, and accounting. This activity is supported by accounting and finance software technologies. Accounting and finance software is employed by most SMEs overall as well as most micro firms.
Human Resource Management activities involve recruiting, hiring, training, and compensation for employees. This activity is supported by human resources management software that monitors employee-related data. Similar to the production planning software, one-third of SMEs employ human resource management software, with about two-thirds of medium firms, one-third of small, and just 8% of micro firms employing it.
Technology Development involves activities related to development of know-how, procedures, and technology. This activity is supported by computer-aided design (CAD) that assists engineers in their design and drafting activities. CAD is employed by a substantial proportion of SMEs (71.9%), with 41.7% of micro, 73.4% of small, and 90.6% of medium-sized firms employing it.
Procurement involves activities associated with purchasing raw materials and inputs for the firm. This activity is supported by electronic procurement systems that allow catalog search and transmission of orders to suppliers. 24.4% of SMEs employ electronic procurement, with 46.9% of medium firms, 19% of small firms, and 12.5% of micro firms employing it.
In summary (see Table 2 and Figure 2), across all SMEs, Web sites and accounting and finance software were being employed in significant majority, in excess of 80% of SMEs. The majority of firms, between 50%79%, had installed technologies such as materials management, order processing, production planning and CAD. A significant minority, between 30%49% of the firms, were employing human resource systems, CNC, and CAM. A minority, between 0%29% of firms, were employing SCM, CRM, and e-procurement.
We found there are only two significant drivers that impact a firms' decision to adopt a technology. Top management and customers have the most influence. Factors such as vendors, media, and government have very limited impact.
There are several significant differences and similarities between the micro, small, and medium firms. When technologies are simple, such as a Web site, an email facility, an Internet connection, and accounting and finance software, then usage difference is minimal. For instance, an overwhelming proportion of SMEsin excess of 95%had an Internet connection and email. As technologies become more complex, the differences between the three groups become more visible. This is true for materials management, order processing, production planning, CAD, CAM, and human resources systems. In employment of technologies such as SCM and e-procurement the medium firms are ahead of small and micro firms.
Technology and Non-Adoption
The research investigated the state of non-adoption with respect to various technologies relevant to the various elements of the value chain. For technologies not adopted, the respondents were asked to select one from the following states: no current activity, aware, interested, evaluated, and rejected. In terms of no current activity, 60%70% of micro firms are minimally aware of SCM, supplier management, CNC, CAM, CRM, human resource systems, and e-procurement. Similarly 35%50% of small firms are minimally aware of the technology set described here; the medium firms are in a better position, as only 15%40% of the firms are minimally aware of the described technology set.
Drivers in the Adoption of IT in SMEs
Survey respondents were asked to identify factors that influenced their decisions to employ particular technology solutions (see Table 3). According to the responses, factors such as suppliers, media, vendors, and government agencies were not influential. Unlike some previous research [12], only top management and customers were seen to have significant impact on adoption decisions. Competitors and personal and professional networks seem to have some impact on their adoption decisions. The factors seem to have varying impact according to their sizes. It was observed that medium firms were more open to personal and professional networks influencing their adoption decisions then were small and micro firms. Suppliers and vendors were seen to have a stronger role for micro and small firms then for medium firms in adoption decisions.
Conclusion
Several interesting issues emerge from our survey findings. The firms were found to be more focused on building their core competencies than competencies in areas such as marketing management. The firms were more interested in employing technologies such as CAD and CNCtechnologies that support core operational activities such as production and design than technologies that support activities such as sales and procurement management. As anticipated, simpler technologies like email and the Web, as well as software packages such as accounting have a much wider application than more complex ones like CRM and SCM.
Firm size has a significant impact on what technologies are employed. Simple technologies, including Web and accounting packages, are used widely across all firm sizes. Similarly, with complex technologies that are minimally employed among SMEs such as CRM and SCM, there is little difference among these firms. For intermediate technologies like materials management, production planning, CNC, CAD, CAM, and human resources, there are significant variations among the three groups, with the medium firms employing them more widely than small firms and small firms more widely than micro firms.
We found there are only two significant drivers that impact a firms' decision to adopt a technology. Top management and customers have the most influence. Factors such as vendors, media, and government have very limited impact.
In terms of non-adoption, the research highlights several interesting elements. Micro firms are seen to be unfamiliar with most technologies with the exception of email, Web sites, Internet connections, and software packages relating to order processing, accounting, and CAD. Medium firms, although not widely adopting technologies such as SCM, supplier management, e-procurement, and CRM, appear to be aware of these technologies. Compared to medium firms, the small firms have a lower level of awareness of technologies that support various value-chain activities.
This research provides policymakers with grounded knowledge to formulate effective policies and support systems applicable to high-tech manufacturing areas such as the Boston metropolitan area. It is evident from the study that technologies are not being adopted across the value chain even in high-tech manufacturing areas. The research brings into focus the roles government agencies and vendors must play in order to make this sector competitive. Since the micro and small firms are not particularly connected with professional and personal networks, it is incumbent on public-sector agencies to provide the necessary knowledge and support. For instance, they could enhance their outreach programs by offering Web-based knowledge repositories and demonstration laboratories. The Web-based knowledge repositories could consist of technology solutions, relevant SME case studies, and best practices. The demonstration laboratories could also have a significant impact in improving the awareness and developing a better understanding of these technologies. Since SMEs are a major contributor in terms of GDP and employment, this study indicates more empirical studies focusing on technologies important to the entire value chain should be conducted.
References
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Tables
Table 1. Technology adoption in the value chain.
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